FSBO

First time buyer - I saw a house that is for sale by owner. Do I need a buyer agent for that?

This is a continuation of the series of posts for first-time buyers. The initial posts concerned the steps in the real estate process involved in looking for and buying a new home. This series of posts concerns some of the things that first-time buyers are likely to hit or questions that they are likely to have.

Answer – Yes, in fact more than ever because you are more than likely dealing with someone who doesn’t understand everything involved in a real estate transaction (even if they say, “I’ve bought and sold lots of houses; so, I don’t need an agent”). Two unrepresented parties trying to bumble their way through the process is not a pretty thing. Let the agent that you’ve been working with in your search know that you’d like to look at that For Sale By Owner (FSBO) house and let him/her do their job for you.

Your buyer agent will make the contact with the seller. One of the first things that your agent will determine is if the seller is willing to pay him/her a commission on the sale. That is important to determine, because the agency contract that you signed with your buyer agent has specific terms tpo deal with the commission issue and FSBO Sellers. Your agent will ask the seller sign a commission agreement to pay him/her a negotiated commission for the sale. The negotiated commission from the FSBO Seller will be the same as was expected if the property was listed on the MultiList Service (MLS).

Most FSBO sellers are going that route because they want to save money on commissions; but they will usually agree to pay a Buyer Agent commission. Some won’t pay any agent anything. That’s a problem that you’ll need to work out with your agent. You could end up paying his/her commission on top of the sale price, if that were the case. Your agent can’t be expected to work for nothing, even if the seller is obstinate about not paying the commission.

If you hit such an obstinate seller, by the way: red flags should already be flying. You’ve encountered a very unhappy and stubborn seller who will probably be difficult or impossible to work with on other issues like price or him making needed repairs uncovered by the inspection. Most likely this seller is unhappy with some past interaction with a real estate agent or maybe with what a Realtor® told him/her that the property is worth on the market or with the advice that the Realtor gave him on the things that need to be fixed or replaced to make the house more marketable.

One immediate consequence of the seller not being listed on the MLS is the lack of information that you would normally have about the property. Things like the mortgage terms that the seller might accept, or the appliances that come with the house or the taxes that the house is charged each year or even how soon the seller could turn over possession will all be missing and must then be ascertained by asking him a whole bunch of questions. He may not have filled out a Seller’s Disclosure form or the required Lead-based Paint Disclosure.

Leave the challenge to get that information and to negotiate those issues with the seller on your behalf with your agent. The negotiations usually starts with price. Many FSBO houses are overpriced to start with, because the owner refused to listen to, and believe, the real estate professional who may have tried to advise him before listing. I have never seen a FSBO house priced below the market. Sometimes the price difference between the asking price and the market price that your agent will advise you on is dramatic. If that is the case, be prepared for an initial rejection when you make a bid based upon what your agent tells you is a fair price.

Sometimes an offer that is quite a bit lower than the FSBO asking price will just tick off the seller and he will tell you that he doesn’t want to deal with you anymore; even if your Realtor went out of his/her way to share with the seller the reasons for the bid price anmd the comps that help set the bid price. Remember that he really doesn’t have to accept any more offers from you – he’s not listed and not playing under the normal rules of real estate. If that happens be happy that you got away from that seller before you wasted much more time.

Often the communications process is much more difficult when dealing with a FSBO seller, since communications with the seller is usually handled by his agent. It can be especially hard if the seller works odd hours or travels a lot. Just getting an answer to an offer can drag out and remember that there will be no agent there with the seller to explain the offer and perhaps calm any initial anger at the offer. The calming and logical influence of a seller’s agent can’t be minimized and will be missed.

If you do get to a negotiated price that both of you can agree upon, your agent will act as the intermediary between you and the seller on the other steps in the process and may suggest a title company to the seller to assist in the process. In these cases the buyer agent almost always ends up trying to guide the FSBO seller through the process too. There are lots of things that the seller’s agent usually does to facilitate the process and FSBO sellers seldom understand all of them or my not even feel like they should be doing them.

You should not be surprised if the seller is difficult to work with on issues that come up, like inspection issues that require the seller to make repairs. This is a seller with a chip on their shoulder already and asking him to do the right thing to put the house in condition for sale often offends or ticks him/her off. Often you may hear the response, “it was good enough for me, so it should be good enough for them.” They may also be difficult to work with on any title issues and any other aspect of the sale that requires them to do things that might normally have been handled by an agent representing them in the sale.

So, are you really getting a “deal” by trying to buy directly from the seller? Perhaps; however, remember that the seller has, at best, saved about half of what the normal commission might have been and in the process added quite a bit of extra effort to the process for you and your agent. Hopefully you were the beneficiary of at least some of the savings that the seller realized; otherwise you just paid as much for the house as you would have if it were represented AND you took on that extra work. It better be a really great house and a good deal, if you’re going to take on the challenges of dealing with an unrepresented seller.

If you are bound and determined to try it by yourself, here's a link to a good advice column written by Elizabeth Winetraub on dealing with FSBO sellers. Take note of all the things she's saying that YOU have to go do.

Norm Werner is a full-time Realtor® working for Real Estate One in Milford, Michigan. Norms helps people buy and sell houses in Southeastern Michigan, in Oakland, Livingston and Macomb Counties You can contact Norm about finding a new home or about getting a Market Analysis for your current home by texting or calling him at 248-7863-2497 or click here to go to his web site and fill out Help Form for buyers and sellers.

To see all of the post that have been made to this series of posts go to the post series index.